The war in the Middle East could mean a cost shock for airlines when fuel prices increase and flight routes need to be rerouted, according to the credit rating agency Scope.
On Wednesday evening, the low-cost airline Wizz Air issued a profit warning, citing the situation.
The outbreak of war in the Middle East has caused oil prices to rise sharply, which risks pushing up fuel prices for airlines. But there are also other effects that the conflict brings, writes Scope in an analysis.
These include the need for airlines to take longer routes to avoid the war zone, possible travel disruptions in the Eastern Mediterranean, higher logistics costs and deteriorating consumer confidence.
”"If the conflict drags on, it will drive up jet fuel prices, force airlines serving South and East Asia to take longer routes and increase the costs of disruption. This means the greatest pressure on airlines with large operations outside Europe and less flexibility," writes Scope.
The credit rating agency points out Lufthansa and Air France-KLM, which are the largest owners of SAS, as particularly vulnerable as they have relatively large exposure to Asia and the Middle East. IAG, which owns British Airways, among other things, is predicted to fare better.
Wizz Air is already signaling that the conflict is hitting profits. On Wednesday evening, the low-cost carrier lowered its earnings forecast for the current year, citing the war as leading to higher fuel prices and canceled flights.
The company estimates that the disruptions will affect net profit by 50 million euros, equivalent to just over 530 million kronor, with a third due to the interruption of flights to the region.
Source: DI.SE
